Brand Valuation

A number of different approaches can be adopted when faced with the task of valuing a brand. In brief they are as follows:

 Cost:

This method looks at all the costs that were incurred in creating a brand or what it might cost to recreate a brand hypothetically. This valuation methodology is, in reality, very rarely used as the costs incurred are more often than not substantially less than the actual value of the brand in the same way as the price of a property is not identical to the cost of the raw materials and labour utilised in building it.

 Market value:

It is theoretically possible to estimate a brand's value based on market transactions involving comparable brands. However this process relies on two factors the first being that these market transactions are publicly available.

 Economic use:

This process records the economic value of the brand in its current use, to its current owner. It is similar to a cash flow valuation that analysts use to value shares merely focussing on the gross profit attributable to selling a branded rather than a non-branded good.

  Royalty relief:

This valuation process is based on the assumption that if the company in question did not own its own brand it would need to license one from someone that did. In doing so a royalty rate charge would be made based on turnover. The fact that the company does own a brand leads to the name ‘royalty relief' as it does not need to incur this charge. Future sales (rather than future gross profit as for the Economic use approach) are forecast, a royalty rate applied to provide an income attributable to the brand that is then discounted back to a net present value.